Penn Contemplates ESPN Exit Strategy
CEO of Penn Announces $2 billion ESPN Bet, Signaling Exit from U.S. Sports Betting Market amid Struggles
Penn Entertainment's CEO, Jay Snowden, sent shockwaves through the sports betting industry by hinting at potential exit options for ESPN Bet, the brand's partnership with Disney. Snowden shared his concerns about ESPN Bet's performance at a recent investors' meeting, revealing that it has fallen short of market expectations over the past 1.5 years.
Snowden presented concerning figures, including a fourth-quarter EBITDA loss of $109.8 million from Penn's interactive arm, which includes ESPN Bet's online business. He then raised the possibility of exercising an opt-out clause in the ESPN Bet deal available in 2026. If Penn chooses this option, it puts the 10-year, $2 billion ESPN Bet agreement, initiated in August 2023, in jeopardy.
Aiming for the Top, Missing the Mark
In 2023, Penn agreed to pay Disney's ESPN $1.5 billion to establish ESPN Bet, along with $500 million in warrants payable over the subsequent ten years. In return, Disney granted Penn a three-year operating period for ESPN Bet. However, part of the deal included a clause allowing either party to back out if business objectives weren't met.
With the three-year period barely half complete, and ESPN Bet lagging behind major competitors in key states such as New York, Illinois, and New Jersey, Snowden warned shareholders of the possibility of exiting the agreement in 2026.
"We didn't come into this partnership expecting to be sixth in the league," Snowden stated. "When we announced our partnership, both sides made it very clear that we expected to compete for a seat at the podium. And we're not on pace right now to do that."
ESPN Bet's Struggles in New York
Recent data from New York, where detailed reports are readily available, reveals that ESPN Bet demonstrated impressive performance in April 2025. In the final week of April, ESPN Bet brought in $1.2 million in gross income from a $13.8 million handle, putting it ahead of BetRivers and Bally Bet. The New York mobile sportsbook sector, overall, experienced a 4.8% year-on-year revenue increase in April 2025, with a total handle of $2.15 billion and cumulative gross revenue across nine sportsbooks reaching $94.4 million.
ESPN Bet offers competitive odds, often better than major sportsbooks like Caesars and DraftKings, making it an attractive choice for bettors engaging in line shopping. However, the growth of the betting market, especially in prop markets and alternate lines for NFL and MLB, remains an area for improvement to boost user engagement and volume.
Future Opportunities and Challenges
ESPN Bet's success in New York, coupled with its competitive pricing, suggests promising potential for market share expansion as sports betting continues to develop in regulated states. Regulatory changes, such as efforts to eliminate illegal online sweepstakes games, could clean up the market and help licensed operators like ESPN Bet sustain integrity and customer confidence.
Penn's Strategic Flexibility
The opt-out clause in the ESPN Bet deal with Disney, exercisable in 2026, grants Penn the option to terminate or renegotiate the agreement. This flexibility allows Penn to react strategically to changing market conditions, competitive dynamics, or shifts in corporate priorities, potentially leading to new partnership models, expanded independent operations, or renegotiated terms for improved economic and operational outcomes.
In the challenging realm of finance and business, Penn Entertainment's CEO, Jay Snowden, is expressing concerns about ESPN Bet's performance in the sports industry, stating that it's not on track to compete with top sportsbooks in key states like New York, Illinois, and New Jersey. This underperformance, combined with a fourth-quarter EBITDA loss of $109.8 million from Penn's interactive arm, has raised the question of whether Penn will exercise an opt-out clause in the ESPN Bet deal in 2026, which, if executed, could impact the 10-year, $2 billion agreement initiated in August 2023.
